Scarcity: Why Having Too Little Means So Much (25 page)

This suggests a recipe: whenever possible, convert vigilant behaviors into one-time actions. Rather than having to be vigilant every time you grab a snack from the pantry, just be vigilant at the grocery store. Many banal tasks have this structure. Keeping your house clean requires vigilance, or (assuming you can afford it) just set up a maid service once. Paying your bills every month requires vigilance. Setting up automatic bill payment only needs to be done once. Remembering to have sufficient cash for tolls while you drive requires vigilance; signing up for E-ZPass, an automatic form of toll payment, is done once. More broadly, because tunneling induces neglect, converting those things that tend to get neglected into one-time solutions can be very powerful. Spending time with your kids invariably suffers when it depends on your vigilance, but if you sign up for a weekly activity together, that one-time action ensures that you will have a minimum amount of quality time together each week.

The other direction also works. Convert questionable one-time
behaviors into the kind that demands vigilance. Some policy makers have proposed
“cooling off periods”
for car purchases, and similar arrangements may be wise for loans of every variety (money, time, calories, and so forth). Essentially, you are setting up a system that requires you to confirm the decision several times before you actually commit to it. (Imagine that any time you receive a tempting invitation, your e-mail is set up to send the following response: “Thank you. I may be able to do this. I will let you know in a week.”)

Occasionally, you may also want to turn automatic renewals into acts of vigilance. When was the last time you checked if there might now be more affordable car insurance than the one you so meticulously chose years ago? Options change, and some one-off choices may also have been misguided. When we signed up for a movie-rental service, we thought we’d be watching several movies a month and returning them promptly. As it stands, it scares us to think of how much we must be paying per movie. Instead of automatically renewing, it might be wise occasionally to confirm the ongoing wisdom of that old one-off choice.

So what about loans? Should we ban quick loans, one-time choices with potentially bad consequences? In the
Family Feud
experiment from
chapter 5
, we saw how removing poor participants’ option to borrow improved overall performance. But, of course, this is where life gets more complicated than the lab. Some loans are bad, but some are good. How do we decide which are which? Even within our own theory, some loans provide needed slack. When your car breaks down and you need cash to fix it, a loan (even an expensive one) may prevent a worse cascade—arriving late to work, risking job loss, and so on. Paradoxically, scarcity increases the chance you’ll need a quick fix, as well as the chance that some such fixes will hurt you.

One insight of the psychology of scarcity is the need to prepare for tunneling and to insulate against neglect: navigate so that bad choices are harder to make in a single moment of tunneling, and arrange it so that good behaviors require little vigilance yet are occasionally reevaluated.

In a
world of tunneling and neglect, a lot depends on timing. Some of our biggest mistakes happen when deciding for the future, when things far removed from any tunnel look distant and fuzzy. Things we’d never agree to today (“Too busy today!”), we readily commit to a month from now (“Sure! Calendar looks wide open!”). Our needs today are pressing; those a month away are abstract and unrealized. This, as we have seen, is how we end up overcommitted. It’s how those strapped for cash end up buying items they eventually cannot afford. The washing machine that was so appealing six months ago, when it came with 180 days of no payments, now has become a major weight.

But once we understand the psychology, we can use it for some good. There is no reason that the very same feature—a lack of appreciation of scarcity in the future—cannot be harnessed to help. A willingness to commit to a less scarce future underlies the well-known
Save More Tomorrow
program, through which people who felt they were not currently able to save agreed to increase their savings deductions whenever their salary increased. There would be no new sacrifices now; only later, in that fuzzy future. The results have been stunning. In one firm, more than 75 percent of those offered the plan chose it over trying to save on their own, and only a minority ever opted back out. By the third pay raise, individuals had more than tripled their savings rates.

What’s particularly clever here is the linkage between something you expect to happen (the salary raise) and something you would like to happen (the increased savings). This arrangement automatically links the two. You can do something similar with borrowing. Consider the following thought experiment. In an attempt to curb predatory lending, one state forces payday lenders to charge lower fees—say, $25 instead of $50 on a $200 loan. Assume the industry remains profitable and survives. In another state, a different program is created: fees remain at $50, but only $25 goes to the lender;
the remaining $25 goes into an account in the borrower’s name. Once $200 has been accumulated in this account—in this case, after eight loans—the person no longer needs to borrow. When she needs a loan, she can use these savings instead. In effect, by saving $25 of every $50 they would have paid for fees, the borrowers can quickly become “lenders to themselves.”

Put simply, the truth about all those good decisions you plan to make sometime in the future, when things are easier, is that you probably won’t make them once that future rolls around and things are tough again. So preempt and link wisely. At a moment of focus on the importance of exercise, buy a membership, hire a personal trainer, bet a friend, do what you can for this motivation to linger once you’re tunneled elsewhere. If you’re focused enough on healthy foods while shopping, make sure to fill the pantry with the right stuff, for those times when your mind is no longer food conscious. And when something—a book, a commercial—happens to focus you for a moment on life in old age, take action. Arrange for an automatic deduction into savings; call your lawyer to arrange a meeting to write a will. Otherwise, you’ll plan to do it sometime soon, but you’ll be in another tunnel then.

Because scarcity taxes bandwidth, a key concern in the management of scarcity is to economize on bandwidth. Just as the busy are concerned with every minute of the day, and the poor focus on money, everybody under scarcity is profoundly influenced by how their bandwidth is distributed and spent.

Bandwidth is about allocating our limited information-processing abilities. In that sense, decisions that demand more information processing have immediate bandwidth implications. Every manager stretched for time values assistants who are good at synthesizing decisions, who can distill choices into their essential components and
present them clearly. A subordinate who delivers large amounts of unprocessed data is far less useful. Clear and simple syntheses are a terrific way to economize on cognitive capacity.

Yet we often fail to appreciate this when presenting information. This was illustrated in
a study of payday loans
conducted by economists Marianne Bertrand and Adair Morse. The researchers divided customers who were about to take a payday loan into two groups. One group was shown a table that listed the annual effective interest rate they would be paying (443 percent) compared to comparable loans (16 percent on a credit card). Another group was presented with similar data, but instead of interest rates, they were shown how many dollars they would pay on the loan if they were to repay in two weeks ($45), one month ($90), and so on, as compared to how many dollars they would pay if the same amount were borrowed on a credit card ($2.50 for two weeks, $5 for a month, and so forth). In other words, similar data were presented in slightly different ways: In one case, interest rate, an abstract measure of something, the precise implications of which may be hard to gauge. In the other, dollars paid, familiar units that you need to take out of your pocket. What Bertrand and Morse found was that far fewer customers took the payday loan when they were shown the cost in dollars. Those who come for payday loans are accustomed to seeing, thinking about, and needing dollars. Interest rates, by contrast, are exotic financial instruments that few of us use in daily life and which require substantial intellectual effort to turn into something more palpable. When your bandwidth is taxed, a concrete sum carries a lot more meaning than some abstract term.

Nutrition labels present a similar problem. They inundate people with a great deal of exotic information. Consumers now get not just calorie information but also information on calories from fat, good fats versus bad fats, essential nutrients (are you getting your omega-3 fatty acids?), percentage daily allowance of several vitamins and minerals, and so on. All this makes for serious information-processing demand, and without an easy way to process the information, it’s hard to know how to act. How bad is a bagel? It is hard to tell.

Simply
making trade-offs can be taxing. Picture yourself with a lot of work to get done. A good friend is leaving town and there is a going-away party that you really should attend, despite all the work. You decide to squeeze it in by going but not for very long. You will decide how long to stay when you get there, depending on the atmosphere and on what feels right. You arrive at the party, and after an hour you start wondering, “Should I go?” The party is fun and your departure could be misinterpreted, but work calls. Is an hour enough time? Will you look rude? You vacillate. You stay a bit longer, but really your mind is no longer at the party. The trade-off—what you are giving up for being at the party—makes it hard to be truly present. You thought you were helping yourself by remaining flexible, but what that really meant is giving way to lingering and distracting trade-offs.

The busy are desperate for time to devote to family and friends. Squeezing this time into a busy schedule is challenging—it ends up a predictable victim of neglect—and even when it is squeezed in, the pleasure is often gone, while the mind is elsewhere, contemplating what could be done instead. One of the wisest interventions we know of for dealing with scarcity’s trade-offs is the Jewish Sabbath. The Sabbath is an old concept. You do not work on the Sabbath, or e-mail, or write, or cook, or even drive. It is a day of tranquility, serenity, rejuvenation of the kind that many of us might not experience for years. And it’s ingenious for at least two reasons. One is that there are no options, no dilemmas; it’s a day of nothing but time off, no trade-offs. And the other is that it happens at the same time every week, right when Friday exits, no matter how busy you might be, no questions asked, no need to plan. The Judaic scholar Abraham Joshua Heschel wrote a book about the Sabbath, which he considered
God’s gift of time
.

The Atkins diet is reminiscent of the Jewish Sabbath. Most diets encourage trade-offs. They allot a certain number of calories, a certain number of grams of carbs, and other assorted constraints. Dieters are then asked to pick the mix of foods that they prefer, while satisfying the overall restrictions. It gives them the “flexibility” to
contemplate their own preferences. But, like the partygoer above, this only condemns the bandwidth-taxed dieter to prolonged bouts of trade-off thinking. And trade-off thinking is both distracting and particularly bad for dieting since focusing on food makes it harder to resist. One study randomly assigned participants to diets that differed in their rule complexity and concluded, “
Perceived rule complexity
was the strongest factor associated with increased risk of quitting the cognitively demanding weight management program.”

The Atkins diet (in its many incarnations) helps resolve this problem. Instead of constant trade-offs, it imposes a very small budget for carbohydrates. This makes some choices quite easy: some foods are so low in carbs that you can eat them without trade-offs. It makes other choices—a very big dessert—a virtual impossibility because they simply have too many carbohydrates. This leaves some room for trade-offs—a small dessert or a few slices of bread—but far less than in a standard diet. Now, there are those who are not convinced the Atkins diet is particularly good for you. But psychologically, it has one distinct advantage. Instead of having to ration your caloric intake and calculate at every meal what you would do, the Atkins diet is closer to the Sabbath, with its simple prohibitions and very few trade-offs.

Another important thing about bandwidth is that it doesn’t remain constant over time. Recall the sugar cane farmers we studied in
chapter 2
. Right before harvest they were poorer and right after harvest they were richer. But more important, right before harvest they had less bandwidth and right after harvest they had more. In a similar way, because of the failure to smooth their consumption, low-income workers who are paid monthly, as well as food stamps recipients, will likely have the least bandwidth near the end of the month and more bandwidth right at the beginning. And it would be
wise to exploit this timing in implementing policy and program design. If you had a program trying to teach almost anything where some bandwidth is required, from health practices to business accounting, when would it be most effective? Right before or right after harvest, if you are teaching farmers? Right before Christmas, when the poor are scraping together money for gifts, or right after? Once you understand the bandwidth timeline, you can mark the calendar for those weeks in which you will find people listening and absorbing and those in which you’ll encounter mind wandering.

The importance of timing bandwidth is that it also allows you to link events to better bandwidth moments, as illustrated by the following telling study. Fertilizer has been shown to have high economic returns for farmers—over 75 percent, for example, for
maize farmers in Kenya
. And yet many Kenyan farmers do not use it. The problem does not appear to be a lack of knowledge; most farmers report that they plan to buy fertilizer, yet fewer than a third actually do. They often cite that they have run out of money. What they really mean is that they did not have the money
when they needed it
. They get paid right after harvest, and the fertilizer needs to be purchased many months later, at a time when they are cash-poor and bandwidth taxed.